Automatic balancing mechanism in pay-as-you go pension systems: a solution to face demographic risk and restores sustainability?

María Ferrer Fernández; María del Carmen Boado Penas

doi:10.26360/2017_7

Authors

María Ferrer Fernández University of Liverpool (United Kingdom)
María del Carmen Boado Penas University of Liverpool (United Kingdom)

DOI:

https://doi.org/10.26360/2017_7

Keywords:

optimisation, population ageing, pensions, sustainability

Abstract

This paper analyses the sustainability of the pay-as-you-go (PAYG) pension system in the presence of demographic uncertainty. Following the paper by Godínez-Olivares et al. (2016b), this paper designs automatic balancing mechanisms (ABMs) using the population structure of three representative countries. The selected countries present a very different age structure. The results show that, in all population structure studied, the variables need to be modified in order to guarantee the long-term financial sustainability.

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